Magazine article Mortgage Banking

Biography of a Dream

Magazine article Mortgage Banking

Biography of a Dream

Article excerpt

Whenever people talk about the American dream, a house and a backyard are usually at the center of the picture. * It wasn't always this way For much of American history homeownership tended to be a fairly low priority historians say The very wealthy bought homes, the middle classes tended to rent and the poor either rented or built their own shacks. Overall, until the 1940s, homeownership rates generally hovered between 20 percent and 30 percent. * This is still true in a number of countries. A number of countries have rates as high as the United States' 67 percent or higher (Singapore hit 89 percent in 2009, according to Singapore government statistics), but far from all do. * Nor does it necessarily correlate with wealth: In Romania, homeownership is 96.5 percent, although annual per capita income is around $2,900 per year, according to 2011 European Union housing statistics. Meanwhile, in nearby Switzerland, average gross domestic product (GDP) is $24,639 but homeownership is roughly 40 percent, according to 2010 Swiss government figures. * Homeownership became part of the American dream because it fused a number of other American dreams, historians say: immigrant dreams, first of all, as 19th-century laborers scrimped and saved for a tiny bit of security. Later, the dreams of reformers, who preached homeownership would build healthier families and politicians' dreams of social stability. But finally and most of all, its invention had to do with the gamble of a certain Hudson Valley homeowner in the 1930s.

Home, sweet home

Americans have always had a soft spot for the idea of the home. The song "Home, Sweet Home" was written in 1823, but seems to have stayed at the top of the pops at least through the Civil War, when it was reportedly popular in both the North and the South.

However, they also had a reputation for restlessness. "In the United States a man builds a house in which to spend his old age, and he sells it before the roof is on; he plants a garden and leases it just as the trees are coming into bearing ... . He settles in a place, which he soon afterwards leaves to carry his changeable longings elsewhere," French traveler Alexis De Tocqueville observed in 1831.

On balance, that restless streak won out. The middle classes of the 19th century didn't much care about homeownership, particularly when it came to a home that wasn't tied to a farm. A farm is a productive asset. A home, on the other hand, is a cost. "Middle-class people would invest their surplus capital in a lot of different places--stocks, bonds, business partnerships ... homeownership wasn't a priority," says Margaret Garb, an associate professor of history at Washington University in St. Louis, and author of City of American Dreams: A History of Home Ownership and Housing Reform in Chicago, 1871-1919 (2005).

Whether you owned or rented was a bit like the decision of whether to own or lease your car today. "The middle classes understood that their status as middle class depended on where they lived, on the design and the decoration of their homes, but it didn't necessarily depend on holding title to that property," Garb says.

The immigrant dream

Immigrants felt differently. In Chicago and other industrial cities in the 19th century, for instance, many people struggled hard to buy their own place, in spite of low, uncertain income.

Why the priority? One factor was simply that they could: In parts of Europe, ownership had always been hard to achieve. Even now, for instance, Ireland's high homeownership rate today (79 percent, according to the European Commission's 2009 Eurostat year-book) is sometimes explained as a holdover from the time before Ireland's independence, when most people worked as tenant farmers for Anglo-Irish landlords.

There were also economic advantages, according to Garb. For a middle-class person, a home may have been non-productive, but a workingman's home really was his castle, in some respects. …

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